ECON 2304 Chapter Notes - Chapter 19: Efficiency Wage, Human Capital, Making Money
27 Nov 2016
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Explore why there are varying salaries for different occupations. People are willing to do fun/easy jobs rather than dull/hard jobs. To induce people to do harder jobs, a higher wage needs to be offered. Compensating differential a difference in wages that arises to offset the nonmonetary characteristics of different jobs. Human capital investments in people: education is the most important type of human capital. Firms are willing to pay more for highly educated workers because these workers have higher marginal products: higher wages compensate for the cost of becoming educated. Natural ability determines how productive workers are and therefore play a role in determining the wages they earn. Firms also reward workers for their effort such as in sales or a salary raise. Chance may also play a role in determining wages: ex: someone attend school with a skill that becomes obsolete when they graduate.
